Adam Smith: Biography & Theory

Adam Smith was born in Kirkcaldy, Fife, Scotland, the date of his birth is unknown but, he was baptized on June 5, 1723. Smith was a Scottish philosopher and economist who became famous after writing his book, “The Wealth of Nations” in 1776.

Theory

Adam Smith’s wrote a book called The Wealth of Nations, in it he talked about his economic theory. Adam Smith’s theory was very important in creating the field of economics and developing it into a autonomous systematic discipline. It is considered the most important book ever created for economics in the western world. It also defended free market policies and was against mercantilism. Mercantilism is the theory that large amounts of money must be in reserves for economic success.

The book also believed that the division of labour was a better way of manufacturing goods, but excessive division of labour would create problems. The book said that worker’s intellect would be negatively affected if they were repeating the same task over a whole day. His beliefs were used to create many other theories and economic systems.

Adam Smith also believed that free-trade had an “invisible hand”. He meant that if manufacturers made their products too expensive, their competition would have cheaper prices and people would buy from there. Adam Smith believed that free trade gave more freedom. There was no order in this economic system, which the government did not like but since it seemed to work so well it caught on and was accepted. Adam believed that the government would have to interfere sometimes to stop big companies from squashing the little companies, but other than that the “invisible hand” would be able to fix most problems.

Proof

An example of one of Adam Smith’s ideas in the Wealth of Nations is about division of labour. He said in his book, that if a worker was to make pins all day, by himself he could make approximately 20 pins per day. There are 18 steps in making a pin, he said that if 10 people divided up the 18 steps, they could make approximately 48,000 pins. This shows how well his idea of division of labour works.

Pros and Cons

Pros:

Division of Labour, can create more goods in one day

Education of Poor Adults, The Wealth of Nations advocated the education of poor adults

Public Education System, The Wealth of Nations also called for a public education system for everyone

Cons:

Division of Labour, Adam Smith believed that if labour was divided up too much, and people were stuck doing small tasks repeatedly throughout the day it would affect them negatively.